China Finance Online Co. Limited
Q4 2013 Earnings Call Transcript

Published: 4 Apr 2014

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the JRJC Fourth Quarter 2013 Earnings Call. [Operator Instructions] I must advise you that this conference is being recorded today, Friday, the 4th of April, 2014. I would now like to hand the conference over to your first speaker today, Mr. Shiwei Yin. Thank you. Please go ahead.

[Shiwei Yin:]

Thank you, Annie [ph]. Thank you for joining us today. Before we begin, I will remind all listeners that throughout this call we may present statements that may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words believe, estimate, plan, expect, anticipate, project, target, optimistic, intend, aim, future, will, or similar expressions are intended to identify forward-looking statements. All statements other than historical facts may be deemed forward-looking. These forward-looking statements are based on current expectations or beliefs including but not limited to statements concerning China Finance Online’s operations, financial performance and condition. China Finance Online cautions that these statements by their nature involve risks and uncertainties and actual results may differ materially depending on a variety of important factors, including those discussed in China Finance Online’s reports filed with the Securities and Exchange Commission from time-to-time. China Finance Online specifically disclaims any obligation to update any forward-looking information in the future. I will now turn the call over to Mr. Zhao for prepared remarks. As usual we will conduct a question-and-answer session at the end of our presentation. Mr. Zhao, please proceed.

[Zhiwei Zhao:]

[Interpreted] Thank you. Hello everyone. We're very pleased to announce that our fourth quarter revenues reached a record-high of $25.8 million, an increase of 400% over last year and an increase of 96% compared to the third quarter. We also returned to profitability for the first time in 11 quarters. After three years of consolidation, our strategic transition has finally taken shape, and with a sluggish Chinese stock market, we took advantage of our internet capabilities to develop internet-based financial services, providing investors with a variety of invest options, including precious metal trading. Proportionally, revenues from financial information and the investment advisory business are going down and revenues from new businesses including financial service have increased dramatically. New business has entered into a growth phase and has become the new growth engine of the company. What we achieved recently is a direct result of our consistent investment in the website and our solid customer base. Over the years we have focused on improving our business fundamentals and continuously enhancing our core competitiveness in internet capabilities. Our two main portals, JRJ.com and StockStar.com, have remained very popular among investors. Our sales and marketing team is one of the most effective in the industry. We believe that our massive user base, innovative financial products, and seasoned customer service professionals will continue to serve as the differentiating advantages for us to compete in internet financial information and financial service areas. With ongoing financial reform in China, internet-based financial services have tremendous potential for growth. We will leverage our long-developed user base to further explore potential market opportunities. Given that these new businesses are still in the beginning stage, we will advance prudently to ensure healthy and sustainable growth. On behalf of JRJC, I want to thank our loyal customers, staff and partners for their continued support, as well as the investors who have stood by us through thick and thin. Last month our stock was included in the NASDAQ Golden Dragon Index and the NASDAQ OMX China Technology Index, indicative of the capital markets acknowledgement of our company. Adhering to our model of making investment simpler, going forward we will strive to build a high-quality online investment platform for the massive users of our two websites. We will continue to innovate, improve user experience, and roll out new financial products to meet the needs of our customers. Now I will turn over the call to Mr. Jeff Wang, Chief Financial Officer, for an overview of our financials. Thank you.

[Jun Wang:]

Let me first review our fourth quarter 2013 financial results. All financial numbers are presented in US dollars and rounded to one decimal point for approximation. Our net revenues for the fourth quarter of 2013 increased by 400% year over year to $25.8 million from $5.2 million in the fourth quarter of 2012, and up 96% quarter over quarter from $13.2 million in the third quarter of 2013. As previously stated, we've re-categorized the components of our net revenues to better reflect the evolving nature of our businesses since the second quarter of 2013. Specifically, our net revenues have been re-categorized under

[Operator:]

Thank you. [Operator Instructions] Your first question comes from the line of John Block [ph]. Please ask your question.

[Unverified Participant:]

First of all, congratulations on this fantastic quarter. You mentioned your revenue is up about 400% year over year and almost doubled from Q3. What is the growth driver? And is it sustainable?

[Jun Wang:]

Well, the growth of the revenue is really from actually the new service we just released in the past year. And as you know, the Chinese stock market has been very weak since the financial crisis and the Shanghai A-share index ended the year down nearly 7%. And it's the fourth consecutive year that Asia index significantly underperformed its global peers and it's down by I think around 36% since end of 2009. So naturally more and more investors actually are looking for -- or in terms of the investment opportunities. So in order to address this demand, we established new subsidiaries and service lines to help our clients trade precious metals online and also provide other services such as mutual fund distribution. We're glad to see that our services have gained popularity among investors. And so our - in the fourth quarter in 2013, the precious metal trading has become the major driver of our revenues. But this actually is still a new business. We're working hard on all fronts and also make additional disclosures when appropriate. But having said that, we believe in the longer term, you know, for precious metal trading services and other related financial services have great potential in China and with solid sustainability. But still this new business is in its early stage, is also subject to government policy changes. But we're actually working hard to drive the growth of our business. Thank you.

[Unverified Participant:]

Great. Can you also say something how you compete with Alibaba's Yu'E Bao.

[Jun Wang:]

Yes. Well, for -- in China, the internet finance based services actually is a very -- the market size is enormous, and different companies such as Alibaba, actually we're targeting different groups of customers, clients. And compared to other internet portals, we actually operate vertical [ph] financial media websites, JRJ.com and StockStar.com, and so we are -- our customers and users are mostly affluent individual investors. We have accumulated a large number of them over the past years. What we need to do is really to leverage on our core strength in internet capabilities and also our innovative -- to be innovative actually in our product and service, really to create a fully integrated investment ecosystem and sifting financial information, marking the data into investment analysis and decision-supporting tools and also actually trading platforms. And our goal is really to make investment simpler and more intuitive for more investors. So in this -- so actually we're more focused and more specialized to serve the affluent and individual investors in China. So this actually -- will actually make us unique -- provide unique offerings compared with the Yu'E Bao and similar products offered by Alibaba and other major portals. Thank you.

[Operator:]

Your next question comes from the line of Kevin Vincent [ph]. Please ask your question.

[Unverified Participant:]

Yes. The concept of internet finance has attracted a lot of attention since last year. What do you think this is all leading to?

[Jun Wang:]

Well, thank you for your question. So as the Chinese investors' disposable income continues to grow in the years, and so these investors are looking for more diversified ways to invest their wealth. And the reason why internet-based financial products and services have gained so much popularity is because there are satisfying investors' pent-up demand for alternative financial investment. And we believe internet-based financial solutions will become the norm for people to manage their wealth in the future. So our only goal is to make investment easier by users through various investment options and highly-capable platforms and high-quality services. Thank you.

[Unverified Participant:]

Also the Chinese government is expected to strengthen the supervision and regulation of internet finance and has recently implemented a policy to limit the amount allowed via third-party payments. How will this impact your business?

[Jun Wang:]

Well, you know, riding on the back of a robust customer demand, internet finance really is here to stay and is expected to grow tremendously down the road. And Premier Li Keqiang of the Chinese government has expressly mentioned that during the National People's Congress and also the Chinese People's Political Consultative Conference, that the government supports the development of internet finance. So we see this as a green light for the government. So we are confident about the macro change of internet finance in China. And at the same time, we're also -- we also recognize that internet finance in China needs to go through a healthy process of development. For example, fund safety, information security and national financial infrastructure are the cornerstones making up the mature internet financial ecosystem. So, strengthening the supervision and the regulation by the government will help create a sustainable internet financial industry in China in the long run and benefit users in leaving only the most qualified, top providers. Thank you.

[Unverified Participant:]

Thank you.

[Operator:]

There are no further questions at this time. I would now like to hand the conference back to Mr. Shiwei Yin. Please continue.

[Shiwei Yin:]

Thank you all for participating in this earnings call and webcast. We look forward to speaking with you again. And have a good day.

[Operator:]

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.